Australian Stocks Rise, Rate Cuts Likely

123jump.com Staff
17 Mar, 2009
New York City

Australian stock index surged after the Reserve Bank of Australia released its latest minutes of meeting. The statement suggested that the central bank has flexibility to lower rates further if economic conditional turn weaker. Chinalco purchase of Rio may fall under more scrutiny.

[R]3:00AM New York, 7:00PM Sydney - Reserve Bank of Australia left rates on hold for future interventions. Australian senate to probe investment laws over Chinalco $19.5 billion Rio Tinto offer.[/R]

Australian stock indexes rose on the expectations that the Reserve Bank of Australia has scope to cut its key lending rate if economy remains weak in the near future.

In Sydney trading ASX 200 index increased 3.1% or 103.5 to 3,451.90.

Of the ASX 200 index stocks, 166 increased, 23 declined, and 11 were unchanged. AWB Ltd. led gainers in the index shares with a rise of 29.3% followed by Aquila Resources Ltd. gaining 26.8%.

RBA Holds Rates for Future Cuts

Reserve Bank of Australia reported today in its March 3 minutes of board meeting that the benchmark rate was kept on hold in order to exercise the option of future interventions should domestic economic conditions continue to deteriorate.

The minutes also noted that early indications were that the monetary and fiscal stimuli applied to the economy were having an expansionary effect. However, the central bank is not sure of the size of the impact of the recent government action and noted that it may take some time for the economy to enjoy the full benefit of these actions.

According to the minutes, the RBA is of the view government’s fiscal package announced in February would provide significant stimulus to the economy over the next two years.

""On balance, they judged that, having made a major change to monetary policy over the preceding several meetings in anticipation of weak economic conditions, the best course for this meeting was to leave the cash rate unchanged. Members believed this would leave adequate flexibility for policy at future meetings,"" said RBA.

Australian Senate to Probe on Investment Laws

Australian Greens Party Senator Bob Brown said in parliament today the Senate economics committee will investigate whether the current investment laws are adequate to protect the country’s interest.

Recently, Aluminium Corp of China or Chinalco is in a process to acquire assets from Rio Tinto in a deal worth $19.5 billion.

However the Foreign Investment Review Board yesterday said it is extending the review of the transaction by 90 days.

Gainers & Losers

AWB Ltd. led gainers in the ASX 200 index shares with a rise of 29.3% followed by increases in Aquila Resources of 26.8%, in FKP Property Group of 25.5%, in Alesco Corp. of 22.5%, and Sunland Corp. of 21.1%.

Babcock & Brown led decliners in the ASX 200 index shares with a decline of 6.3% followed by losses in Babcock & Brown of 5.3%, in Macquarie DDR Trust of 5.1%, in Valad Property of 5.1% and OZ Minerals of 4.9%.

Resources stocks dropped after gold prices dipped 0.9% to $922 per ounce.

Territory Resources Records A$33 million Loss in H1

Territory Resources reported loss in the six months to December 31 of A$33 million compared with a profit of A$2 billion in the same period a year ago as costs associated with investments and currency exchange increased to A$38 million.

Revenues from operations in the period rose by A$29 million from a year ago to A$65.9 million, up from $29 million in the previous corresponding period.

The iron ore producer had a foreign exchange loss of A$13.4 million and A$15.1 million impairment associated with Territory''s foreign exchange hedge book.

In addition, Territory Resources incurred an A$8.7 million impairment on its investment in Matilda Minerals, Matrix Metals and Northern Mining.

Asian Markets Review

The Nikkei 225 Index in Tokyo closed higher 244.98 or 3.18% to 7,949.13, Hang Seng index in Hong Kong decreased 98.62 or 0.76% closed to 12,878.09, CSI 300 index in China higher 80.79 or 3.60% closed to 2,322.40. ASX 200 index in Australia increased 103.50 or 3.09% closed to 3,451.90. The KL Composite index in Malaysia higher 0.99 or 0.12% closed to 841.87.

The Kospi Index in South Korea increased 38.42 or 3.41% to close at 1,163.88. SET index in Thailand closed lower 2.29 or 0.54% to 422.32 and JSE Index in Indonesia decreased 12.76 or 0.96% closed to 1,312.09. The Sensex index in India decreased 79.72 or 0.89% closed to 8,863.82.